Bernie Sanders and Donald Trump Have Something In Common: Big Dreams They Can’t Pay For

Sen. Bernie Sanders (I-VT) and President Trump have more in common than either would likely admit. For example, both have grand, ambitious plans they cannot pay for.

Sanders would turn the US health system into Medicare for All. President Trump wants historically large tax cuts for businesses and individuals. Achieving either would require trillions of dollars in new taxes or add trillions of dollars to the federal debt. In theory, Congress could find the money to pay for either. But it is simply inconceivable in the current political and fiscal environment.

The president has done much the same with tax cuts. He’s proposed big rate cuts, as well as other tax reductions, without disclosing how he’d pay for them. He may never do so, however, instead leaving that onerous task to Congress.

While TPC has not analyzed Sanders’s latest health plan, the Urban Institute’s Health Policy Center did estimate his 2016 campaign proposal. That proposal, which was similar to his latest plan, would have increased federal medical spending by $29 trillion over 10 years.

Medicare for all

Sanders new plan would first eliminate nearly all beneficiary costs (most copays as well as deductibles and co-insurance) under Medicare. Then, he’d lower the program’s eligibility age—first from 65 to 55, and then to everyone over the following three years.

This would raise the cost of Medicare in three ways. First, the program would have to pick up all those out-of-pocket costs that Sanders would scrap. Second, without cost sharing, beneficiaries will almost certainly use more medical care. After all, it would be free, or at least seem so to those consumers.

Sanders says his Medicare-for-all plan would lower administrative expenses and reduce drug prices. Perhaps. But these costs combined represent only about one-fifth of all medical costs and even he doesn’t claim he could reduce them to zero. How would he pay for the rest?

To my ear at least, Sanders’s promise to reduce the cost of his single-player plan through future reductions in medical costs echoes Trump’s claim that his big tax cut will pay for itself by boosting economic growth.

Both promises are politically appealing. But, sadly, each is also implausible.

Raising taxes at all in the current political environment seems unrealistic. Increasing them enough to pay to expand a government entitlement by another $29 trillion? To ask the question is to answer it.

Employer-based insurance

But let’s dig into the Sanders plan to understand just one reason why it would be so hard to finance. The Kaiser Family Foundation reports that workplace insurance premiums ran almost $19,000 for typical family coverage last year. An average worker paid about $5,700 and her employer contributed paid about $13,000. Unlike wages, the employer share of premiums is tax-free, exempt from both income tax and payroll tax.

Under the Sanders plan, that system would end. Workers would get government insurance that would have to be funded by some combination of premiums and taxes (and any cost savings that do materialize).

Economists will tell you that there is a lot more going on here than is apparent. To start, while workers would lose their employer-based health benefits, they’d also get paid more as compensation shifts from health coverages to cash wages. Economists are certain this would happen, though workers probably don’t believe it.

Big dreams

They won’t doubt the other result. Without the current law tax exclusion, those higher wages would be taxable under the Sanders plan. And, depending on how Sanders decides to pay for his single-payer idea, many workers might be paying higher tax rates than they do today as well. Thus, 155 million people would be asked to swap highly-subsidized workplace insurance for government insurance and higher taxes.

Give both men some credit for their big dreams. But in the real world, their ambitions are far bigger than our willingness to pay for them.

Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.